At the end of 2016, a trio of reports are being released by the US government all of which reflect upon the IP environment in China
The first one to be released was the Joint Strategic Plan of the IP Enforcement Coordinator at the White House for the years 2017-2019 (released Dec. 12, 2016) (152 pp). The second is the Notorious Markets Report of the US Trade Representative, was released yesterday, December 21, 2016 (22 pp). A third report on China’s WTO compliance, hearings for which were held earlier in 2016. This annual report is due shortly. The last report focuses on WTO issues (including IP), while the first two focus on IP issues (including China).
The Joint Strategic Plan singles out China’s “weak protection of intellectual property” (p. 4), relying upon a variety of sources of data, including USTR reports, US Customs seizures, “massive online and physical markets” , business survey data, antitrust concerns, and other sources. The report also notes China’s legislative efforts to reform its IP laws, the positive role of the National Leading Group, and the “welcome” development of the specialized IP court pilot project.
The report also singles out US engagement with China on cyber theft as well as US efforts more generally to “mitigate the theft of US trade secrets.” As I have pointed out elsewhere, trade secret misappropriation is a complicated area, where civil, criminal and administrative remedies can be improved and there can be close links to industrial policy.
The Notorious Markets report has gotten the most attention because Alibaba’s Taobao has now been placed back on this list. Taobao is not the only market with a Chinese link. Other sites included Gongchangcom, which reportedly sells counterfeits, including counterfeit security acts to attach to counterfeit merchandise; Nanjing Imperiosus Technology Co., Ltd (also operating as Domainerschoice.com), which provides services to illegal online pharmacies; and several physical markets. These markets include the Baiyun Leather Goods Market (Guangzhou), Jing Long Pan Foreign Trade Garment Market (Guangzhou), Chenghai District Market (Shantou), Wu Ai Market (Shenyang), Cheng Huang Cheng Intenraitonal Auto Parts Market (Beijing), and the Silk Market (in Beijing).
The reports notes that Alibaba’s leadership has underscored the efforts it is taking to address counterfeits but that Taobao “is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.” Alibaba was previously on the notorious markets list four years ago. Taobao is among the 15 top sites globally, and among the top 5 in China and was the subject of numerous notorious market submissions by industry. Some US companies had been questioning why Taobao had been dropped from the list (see my blog from a program at Cardozo law school). Alibaba’s President, Michael Evans, in response to the relisting of Taobao, noted that the decision “leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate.” A press release of the American Apparel and Footwear Association supporting USTR’s decision to list Taobao is found here.
The Notorious Markets Report was released in the afternoon of December 21, 2016; it remains to be seen how much affect (if any) the report has on shares being traded in the United States (see chart above). Alibaba did overcome other counterfeiting-related legal hurdles this year. Alibaba had been the subject of several US law suits involving its alleged involvement in counterfeiting activities. A racketeering claim was dismissed in August of this year. In June of 2016, Alibaba reported that seven securities class actions law suits against Alibaba were dismissed that involved allegations that Alibaba failed to disclose a “white paper” issued by the State Administration for Industry and Commerce before its US public offering. The white paper was reportedly critical of Alibaba’s IP protection policies. Attached are two of the recent US court decisions involving the shareholder law suits.
These are personal, non-official opinions.
Categories: Alibaba, China IPR, Counterfeiting, USTR
Are you aware of studies/surveys done on Taobao regarding the number of counterfeited products on offer? Alibaba refuses to publish any statistics about the topic (its comments to the USTR 301 commission in 2016 were heavily redacted when published). Alibaba’s President Michael Evans just admitted “the persistence of some level of counterfeit listings”.
In its January 2018 report, the USTR has pointed out that « Alibaba has not identified metrics to assess objectively the scale of infringing products sold on Taobao.com nor objectively demonstrated that the volume or prevalence of counterfeit goods has decreased over the last year ».
Alibaba generally prefers to mention the amount of money it spends to fight counterfeiting, even if it is not clear what that really covers. But it would appear that its PR efforts are working…
This is a tough one. I dont think we have comparable data from ebay or amazon either. The companies are all reluctant to share data, which could help third parties. Even IP enforcement data from governments is inconsistently available. NYS data is good, Cal data is hard to find. Alibaba has taken some proactive steps in the face of an infringing flood. The TRIPS agreement doesnt require controls over exports…is it half empty or half full?